India's market cap slipped below Rs 400 lakh crore, FPI selling became the reason

The market cap of BSE-listed companies fell below Rs 400 lakh crore amid selling by foreign investors and weak earnings performance.

The market capitalization (Mcap) of BSE-listed companies fell below Rs 400 lakh crore on Friday amid continuous selling. 

However, it improved slightly to Rs 400.2 lakh crore, the lowest level since June 6.

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India's market cap breached the Rs 400 lakh crore mark for the first time on April 10 and hit a high of Rs 477.93 lakh crore on September 29. 

Since then, the market capitalization has declined by about Rs 78 lakh crore.

According to Bloomberg data, India's market capitalization in dollar terms has fallen below $4 trillion and has lost $1.2 trillion from its peak. 

In the last five months, India has seen a significant decline in market cap among several major markets. According to BSE and NSE data, the market's market cap in dollar terms is around $4.6 trillion.

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The main reason for the sharp decline is the selling by foreign portfolio investors (FPIs) and weak earnings from Indian industry. The selling by FPIs so far this year has exceeded Rs 1 lakh crore.

Harald van der Linde, head of equity strategy for Asia Pacific affairs at HSBC, said, "Growth is slowing, while high US bond yields and foreign exchange pressures keep foreign investors worried."

He said, "We believe that India's premium multiple valuations will remain under pressure until the earnings situation strengthens. 

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The third quarter results have been worse than expected. Growth may remain weak for at least two more quarters. The recent sell-off has created an opportunity to buy companies with strong growth or on the path of recovery."

Frequently Asked Questions (FAQs)

Why has India's market capitalization fallen below ₹400 lakh crore?

India's market capitalization has dropped due to continuous selling by foreign portfolio investors (FPIs), weak corporate earnings, and global economic concerns such as high US bond yields and forex pressures.

How much market capitalization has India lost from its peak?

Since reaching a high of ₹477.93 lakh crore on September 29, India's market cap has fallen by approximately ₹78 lakh crore.

What is the impact of foreign portfolio investors (FPIs) on the Indian stock market?

FPIs have sold over ₹1 lakh crore worth of Indian stocks this year, contributing to the decline in market capitalization and increased market volatility.

Will India's market capitalization recover in the near future?

Experts believe that recovery will depend on improved earnings performance from Indian companies, global economic stability, and foreign investor sentiment. Growth may remain weak for at least two more quarters.

How does the falling market capitalization affect retail investors?

A declining market cap can lead to lower stock prices, increased volatility, and potential losses for retail investors. However, it also creates opportunities to invest in fundamentally strong companies at lower valuations.